Saturday, September 17, 2011
2:22:26 PM EDT

Plenty of Candidates

by
James Brown

The stock market's widespread rally last week has created a large number of bullish-looking candidates.
We are adding PX and WFM as new trades tonight. Here is a list of stocks that caught my eye as potential trades:

Why We Like It:
This is a relative strength and technical breakout trade. PX has produced a healthy rebound from last Monday's low near $92.50. The stock did not have a lot of short interest so I doubt this is all short covering. In just the last couple of days PX has broken through key resistance at the $100.00 mark and its 50-dma and 200-dma.

Now I will agree that PX is arguably short-term overbought here but stocks can always get more overbought. In addition to the technical breakout past resistance it's also a breakout from an inverse head-and-shoulders pattern, which is forecasting a rally toward the $110-111 area.

I am suggesting we buy calls now but only if PX and the S&P 500 index both open higher on Monday morning. We do want to keep our position size small to limit our risk, especially since PX looks a bit overbought here. Aggressive traders may want to buy calls on PX above $101.00 even if the stock market is negative on Monday.

Our first target is $104.80. Our second target is $109.00. The Point & Figure chart for PX is bullish with a $115 target.

*See Entry Point Details Above*

- Suggested Positions -

buy the OCT $105 call (PX1122J105) current ask $1.40

Annotated Chart:

Entry on September xx at $ xx.xx
Earnings Date 10/26/11 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on September 17, 2011

Why We Like It:
This is a simple relative strength trade. Many of the high-end and luxury retail stocks were starting to show strength this past week. WFM is a high-end grocery store chain and its stock has broken out past major resistance near $68.00 to close at five-year highs on Friday.

I am suggesting call positions now but only if WFM and the S&P 500 index both open positive on Monday. As an alternative aggressive traders could buy calls on WFM above $70 even if the market is negative. I'm suggesting a stop loss at $65.25. More conservative traders may want to use a stop closer to $67.00 instead. Our target is $74.50. The Point & Figure chart for WFM is bullish with am $85 target.

*See Entry Point Details Above*

- Suggested Positions -

buy the OCT $70 call (WFM1122J70) current ask $2.85

Annotated Chart:

Entry on September xx at $ xx.xx
Earnings Date 11/02/11 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on September 17, 2011